After two months of brisk sales, General Motors (GM) will end its popular employee-discount program Monday and try to wean customers from...
DETROIT — After two months of brisk sales, General Motors (GM) will end its popular employee-discount program Monday and try to wean customers from incentives as its 2006 models hit showrooms.
The employee-discount plan, which allows customers to buy GM vehicles at the price employees pay, has been in place since June 1. It originally was scheduled to end July 5, but the company extended it until the close of business Monday. Some dealers had expected the plan to be extended once again, but GM confirmed yesterday that the deal will be ending.
Ford and DaimlerChrysler matched GM’s incentive program in July, but it wasn’t clear yesterday whether the companies will extend their programs to grab sales from GM.
Chrysler still plans to end its employee discount Monday and will wait until then to announce any changes, spokesman Kevin McCormick said. Ford won’t announce until Monday whether it’s extending the discount, spokesman Dan Bedore said.
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GM spokeswoman Deborah Silverman said the employee discount worked well for GM, which saw sales go up 41 percent in June and has kept up that brisk pace this month. But the company wants to shift the focus from deals on its 2005 vehicles to its 2006 lineup.
Starting with the 2006 model year, GM plans to set lower prices for many models instead of relying so heavily on incentives to bring prices down, Silverman said.
Silverman said GM’s emphasis on incentives has made it difficult for consumers to compare GM vehicles to their competitors because the base prices shown on the Internet don’t take incentives into account.
According to Autodata, GM spent an average of $4,458 per vehicle on incentives in June, higher than any other automaker. Toyota Motor spent $1,090 but still saw vehicle sales rise 11.6 percent.
“When you become less reliant on incentives, it allows consumers to more effectively compare vehicles,” Silverman said.
Jim Sanfilippo of Bloomfield Hills-based Automotive Marketing Consultants said part of the allure of the employee discount was no-haggle pricing. GM needs to continue that message as it goes into the 2006 model year, he said.
But other industry analysts say it could be difficult for GM to convince customers they’re getting a good deal without incentives, or to attract new customers to vehicles that have been heavily discounted in the past.
“The employee price deals will likely hurt Ford and GM efforts to build a brand image signifying quality,” Goldman Sachs analyst Robert Barry said in a note to investors.
But Pat Norris, the owner of Norris Auto Mall in Medina, Ohio, said the employee discounts helped gain new customers who were drawn in by the deal and were impressed with GM’s quality.
Many customers at his dealership this summer were trading in foreign brands for one of his Pontiac, Buick, Cadillac or GMC vehicles.
Norris predicts his sales will be up 30 percent over last July.
He said the deals also did a good job of clearing out 2005 models, which was another of GM’s goals. Bloated inventories caused GM to cut production in the first three quarters of this year, which hurt profits.
Merrill Lynch analyst John Casesa said in a note to investors that GM’s inventories will decline to about 800,000 vehicles at the end of July, or about 17 percent below average.